Return on Investment: Are You Getting It?

Chiropractic EconomicsJanuary 11, 2001

As Eastern Virginia representative to the Virginia Chiropractic Association, I recently did a survey of area doctors. One question on the survey: “A marketing strategy that I have finally learned just does not work is….” I received responses citing the perils of radio, television, newspapers, Yellow Pages, mailers, etc. My question is this: How do you know what does work — or what doesn’t?

On the surface, this might appear to be a simple question, but it isn’t. Let’s take advertising in your local newspaper. You advertise for six months and are disappointed in the results. You declare this effort a failure, and vow never to listen to that sweet-talking ad rep again. Are you sure it didn’t work? Could it have worked if you had done things differently? Let’s ask some better questions.

Return on investment (ROI) is the central issue here. Let’s say you paid $5,200 for this series of newspaper ads, and only got four patients as a direct result of the campaign. Was it a success? Maybe. Let’s say that Patient A only came to see you twice, Patient B came in for care for two weeks and left happy, and Patients C and D now come in for occasional aches and pains. You are disappointed Patients B, C and D didn’t stay on as wellness patients, but you avoid berating them for not taking your wellness-care recommendations, and they genuinely appreciate how you’ve helped them. Six months later, Patient B refers his neighbor. The neighbor is a great patient, and refers others.

Now that we’ve run the numbers, we know that during the six months when you actually ran your ads, you took a bath (21 cents return for every dollar you spent). But looking back, it actually turned out to be a sound investment ($3.48 return for every dollar you spent). Let’s ignore inflation here, and the opportunity cost (you could have spent those advertising dollars elsewhere), and call this a successful investment in the long-run.

Think of your Yellow Pages, or newspaper ads, or patient newsletter, exactly as you think of your mutual fund. How is it performing? If you invest $5,200 in a mutual fund, and 21/2 years later your holdings are worth $18,000, you’re doing quite well. With a mutual fund, you keep in mind your fund’s expenses and taxes. With an advertising source, you also need to keep in mind that there are costs related to “redeeming” your $18,000 (essentially, your overhead).

Figuring your cost to see a patient is a whole other issue, but it’s worth noting that if it costs you $38 to see a patient, then any patient you see for $35 per office visit is one that you essentially pay to treat. Consider the costs and benefits when you consider offering free or discounted services. Know your numbers, and avoid building a huge practice that works you to death for free (managed-care does it to you, and discounted care can cause you to do it to yourself!).

In determining where to best spend your advertising dollars, you should consider the following:

What are my options (internal vs. external marketing)? Low-cost marketing is always best. An enthusiastic, excited patient is the best ad in the world. Put a dozen cards (at 5-15 cents each) in their hands, and you can easily reap 1,000% ROI or more. In addition to internal marketing, consider the value of external marketing, the sort that doesn’t require your time and energy. Again, think of it like your mutual fund: You don’t ever need to visit Cisco or Coca-Cola — they’ll do just fine without your active involvement, and it’s likely you’ll still receive a nice return. If your first love is treating patients, why not focus on that while you allow your staff members to do the bulk of the marketing work? When choosing where to spend your money, review all your options and do not let your ego guide your decisions. A lot of different people are vying for your money, so review the field and analyze each option (patient newsletters, lunches for the attorneys, a bigger sign, billboards, Yellow Pages, etc.). You can’t — and shouldn’t — do it all.

What are my resources (primarily money and time)? Do you have $5,000 budgeted for marketing this year? $50,000? Choose what you spend based on what you have, and hold something in reserve for the unexpected opportunity.

How can I best match my resources to my options? In other words, do I have any reason (data, information, instinct) to choose one marketing option over another? Where is the best return on investment? If you have been in practice for 20 years and have good ROI data, you’re set. You know what worked for you, what didn’t, and have a finger on the pulse of change. This last element is crucial, because what worked in 1982 when you were the only chiropractor in the Yellow Pages may be different than today. Don’t just throw your money at old winners (mutual fund equivalent: “Past performance does not guarantee future returns.”). The numbers (ROI data) are no excuse for turning off your brain. If your 1998 radio spots returned $8.50 on the dollar, but today the rates have tripled and every chiropractor in town is advertising on the airwaves (called “saturation”), you may be looking at a black hole. Use your data, and your head, to guide you. What opportunity is right in front of you, that everyone else is missing or underutilizing?

How do I gather the data necessary to track my ROI?

To determine your ROI, you need to keep track of:

advertising period (beginning, end).

advertising source (newspaper, radio, television, etc.).

investment amount.

referral source for all patients. (This is critical. On your new patient form, or when patients call in, find out who referred them. If possible, see if your staff can find out more. If a new patient says or writes “Yellow Pages” as a referral source, it may turn out that Susie Smith told them about you, and they simply looked in the Yellow Pages for your phone number. If you and your staff don’t dig a little, you may end up giving expensive passive marketing sources undeserved credit, and you’re more likely to waste money on them due to your skewed data. If you hadn’t had that Yellow Pages ad, might they simply have called Susie to get your number? Or would the line listing have been sufficient?)

dollars actually collected from patients, via this source. (Track the collections from referred patients, and don’t forget to include the next generation(s) of collections from people they referred, etc. This multiplier effect can turn your $150 mailing into a $30,000 bonanza, if it hits the right people.)

other factors. (Include any relevant information. Was this the first year you had competition? Were you the only female advertising, “Gentle care for women, by women?” Did the advertiser bury your ads, or make a printing error? Did your ads run during the storm of the century? Dig for reasons why your marketing was leveraged, or disadvantaged, by outside influences. Perhaps you can clip a copy of your ad, so that three years from now you can remind yourself what people responded to, or didn’t.)

How will the outcome affect my future decisions? Learn what works, and what doesn’t. Learn what happens if you cater to women, or use evocative photos, or focus on price preferences. If you spend a lot of time tracking your patient sources, and run the ROI data, why not use it? Look at your numbers, look at how things have changed, and then make your best-educated guess. This gives you an advantage over the next guy, who may simply be guessing. If life is a gambling hall full of games of skill (that contain elements of chance), then the gambler who knows the odds can leverage his or her skill to maximize outcomes.

ROI can be used in creative ways. For example, you can determine your ROI for a managed-care company: They are a marketing source that costs $X (application fee, additional staff resources, required seminars, write-offs), and brings in $Y. Why not figure out if your investment is paying off?

What’s the next step in determining what works and what doesn’t when it comes to chiropractic advertising? We need to go beyond the opinions about what works, to hard data. Example: Wouldn’t it be great if we could collect national data and create the following type of “formula”: “In metropolitan areas where mean household income is above $X, the following ad consistently produces a ROI of 1.24-3.46 when run in black and white in the leading local newspaper on page 3, 4, or 5.”

This is the type of group effort that could help us hit more home runs, minimizing the time we spend slugging at the ball and twisting in the wind as the target flies by. I’m convinced we can do it — together.